The largest transfer of wealth is coming: Baby Boomer wealth statistics in Australia

Over the next 20 years or so, the Boomers are going to begin passing down their accumulated wealth to the next generation(s). In fact, the so-called Great Intergenerational Wealth Transfer of the 21^st Century has already begun as the Baby Boomer generation retires or ages out of the working population.

Here at Kelly+Partners, we talk about family wealth preservation and intergenerational estate planning all the time. It’s just what we do. So, naturally we know all about these eye watering stats. 

What eye watering stats?

The baby boomer wealth transfer numbers, stats, and information we get to work with. 

Keen to peek behind the curtain and see what we’re talking about?

Ageing Baby Boomers

The Baby Boomers, the babies born after World War II between 1946 and 1964, are getting older. Do you realise in 2021, the oldest Boomers are turning 75. And the young whipper snappers will be chalking up 57 years on the planet.

Just to give it some (cheeky) perspective, these people were born in 1946.

• former US President Bill Clinton
• actor and activist, Susan Sarandon  
• movie director, Steven Spielberg
• Cher

Yep, Cher. She turned 75 back in May 2021. Wonder if she ever wishes she could turn back time?

At the other end of the Baby Boomer spectrum:

• former US president, Barack Obama (1961)
• singer, Lenny Kravitz (1964)
• basketballer, Michael Jordan (1963)
• actor, Russell Crowe (1964)
• actor, Brad Pitt (1963)

We’ll just let that last one sink in. Brad Pitt is a Boomer.

What is the Great Intergenerational Wealth Transfer?

What this all means is that the Boomers are either retiring, thinking about retiring or are sadly, passing away. And as the wealthiest generation in history, that’s an awful lot of dollars being simultaneously passed down from one generation to the next. 

Wealth transfer is the transfer of wealth from one person to another, such as when a husband dies and his estate passes to his wife. Intergenerational wealth transfer is wealth passed from one generation to the next: Father to daughter, grandmother to grandson or aunt to niece etc. 

In Australia alone, The McCrindle Wealth Transfer Report estimates that Boomers will pass AUD $3.5 trillion onto their kids and grandkids. Although some are opting to, rightfully so, enjoy their retirement and spend some of their wealth while they still have the ability to do so. 

The McCrindle report also warned ‘this is the largest and most significant intergenerational wealth transfer Australia has ever seen, and it presents a unique opportunity or alternatively a wasted chance for the next generations to significantly shape our nation’s future.’

How many Aussie boomers are we talking about?

According to the Australian Bureau of Statistics (ABS) on December 31, 2020, Australia had a population of 25,694,393. Addressing Australia's ageing population, the site states:

‘Like most developed countries, Australia's population is ageing as a result of sustained low fertility and increasing life expectancy. This has resulted in proportionally fewer children (under 15 years of age) in the population and a larger proportion of people aged 65 and over.’

Source: ABS website: Twenty years of population change

While Baby Boomers make up only 25 percent of our population, they own 53 percent of our national wealth. A 2017 Griffith University and No More Practice (NMP) Education report Reinvention is the new Retirement, looked at the opportunities the intergenerational wealth transfer would afford Gen X and Y. Early on it noted:

‘Further analysis of the likely distribution of intergenerational wealth also illustrates the importance of careful orchestration. Whilst the 80/20 rule bears out with 20 percent of the population inheriting 77.54 percent of the pool…’

More people over 60 - and they're living longer

With the median Australian age now 37 years and with Aussies living longer than ever before, more people are aged over 60. In fact, the McCrindle report suggests 21 percent of the 2017 population were over the age of 60, and expected that number to increase to 25 percent by 2036.

Source: The McCrindle Wealth Transfer Report, 2017

People are also living longer, with today’s 65 year olds living on average 7 years longer than their parents. Not to mention, today’s 60 year olds are also ‘younger’ longer, a phenomenon called down ageing.

Source: The McCrindle Wealth Transfer Report, 2017

The flip side of all this youthful, 65 year old pep and vigour is a longer retirement age. And this retirement needs to be funded. 

Funding our boomers in the lifestyle they want

The McCrindle report says with more people living longer, that’s an extra 35,024,927 retirement years to fund. 

Source: The McCrindle Wealth Transfer Report, 2017

And this generation, who are living longer and younger, want more out of life. No longer are our elders’ content to just do grandparent duties, have Saturday dinner at the RSL and maybe pop down the coast for a sneaky two weeks in the caravan at Christmas. With a combined $3.5 trillion to spend, there’s a whole world out there just waiting to relieve these cashed up retirees of their money (global pandemics notwithstanding).

So, what's a boomer really worth in dollars and cents?

The following table shows the total number of households and their average net worth, broken down into five year age groups. By multiplying the total households by the average net worth, you arrive at the net worth of each age bracket.

Source: The McCrindle Wealth Transfer Report, 2017

Although it’s true that $3.5 trillion is increasing by an average of 7 percent per annum, within 20 years the youngest Boomers will be 80 years old and 70 percent of this wealth will have been spent or transferred to the next generation.

If you’re reading this and are scratching your head at some of these stats, maybe you need to have a chat with a professional estate planner or wealth management expert. Or if you think it’s about time to have a clear business succession plan in place, the Kelly+Partners team is just a call away.